Taxable income and Liability
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1) The following information is available for Sam and Sally Wells, a married couple filing a joint return, for 2007:
Salary (earned by Tom) $100,000
Interest income 12,000
Deductible IRA contributions 8,000
Itemized deductions 11,000
Exemptions 6,800
Withholding 15,000
a. What is the amount of their gross income?
b. What is the amount of their adjusted gross income?
c. What is the amount of their taxable income?
d. What is the amount of their tax liability (gross tax)?
e. What is the amount of their tax due or (refund due)?
2) Carla, a single taxpayer, had the following income and deductions for the tax year 2006:
INCOME
Salary $70,000
Business income 30,000
Qualifying dividends 10,000
Tax-exempt income 20,000
TOTAL INCOME $130,000
DEDUCTIONS:
Business expenses $20,000
Itemized deductions 12,000
Personal exemption 3,400
TOTAL DEDUCTIONS $35,400
a) What is Carla's taxable income and tas liability for the year?
b) What are Carla's marginal, average, and effective tax rates?
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Taxable income and liability issues are emphasized.
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